Arizona Court of Appeals Division One Holds Homeowners May Not Recover Damages or Unwind a Trustee Sale When Lender Transfer Documents Contain Immaterial Errors

Homeowner Nancy Sitton brought an action for damages and to quiet title against Deutche Bank, alleging that false assignments and notices were recorded before a trustee’s sale of her home.  The lender had engaged in multiple transfers of the interest through the Mortgage Electronic Registration System (MERS), a private nationwide database that tracks the transfer of mortgage ownership interests and servicing rights.  Sitton’s home was then sold at a trustee’s sale.  The trial court granted summary judgment in favor of the lender, and Sitton timely appealed.

The Court of Appeals affirmed the grant of summary judgment.  The Court first rejected a number of arguments that Sitton’s claims were infirm.  The Court held that by failing to seek injunctive relief before the trustee’s sale Sitton had waived her claim to title to the property under A.R.S. § 33-811(C) but retained a claim for monetary damages under A.R.S. § 33-420(A).  The Court also held that Sitton had standing to bring suit under A.R.S. § 33-420(A), that the documents in question fell within the scope of the statute, and that the one-year statute of limitations for claims arising from statutes did not apply because the A.R.S. 33-420(A) imposes liability in the form of a penalty.

The Court then went on to affirm the summary judgment because Sitton could not prevail on her claims as a matter of law.  The misrepresentations in the recorded assignments were immaterial to Sitton because MERS was the mortgagee of record.  The legal status of the underlying note holder did not affect the status of MERS as mortgagee of record, so incorrect statements about the underlying note holder were irrelevant once the deed of trust was executed.  Although the Court agreed that the recorded documents contained misrepresentations, they were not material because they were subsequent to the deed of trust and therefore could not have induced Sitton to act differently with respect to the mortgage transaction.

Judge Swann authored the opinion; Judges Johnsen and Howe concurred.